AG Becerra on health care consolidation in California

In a recent POLITICO California Pro Q&A with Attorney General Xavier Becerra, the California AG commented on a broad range of topics, including consolidation in health care.

 

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In March 2018, Becerra filed a lawsuit against Sutter Health, claiming the hospital system engaged in anti-competitive practices, resulting in higher health care costs for patients. Specifically, the complaint alleges that the hospital system engaged in practices to maintain its power to control prices, exclude competition, and impose prices far above the prices that would have been available in a competitive market.

Sutter Health has since denied the accusations.

In reference to the Sutter lawsuit and how it relates to consolidation, Becerra told POLITICO,

“What we’re seeing is consolidation that’s leading to higher costs, which essentially means that the consolidation isn’t extracting efficiency, it’s extracting more money out of the pockets of patients….the consolidating activities engaged in by Sutter were leading to higher costs for people — not necessarily the efficiency and coordination that everyone had been hoping for, but just higher costs.

They were figuring out how to game the system.”

Becerra says the case will likely head to trial this year. When POLITICO California Pro reporter Angela Hart asked if the lawsuit and its outcome might deter future attempts at consolidation, Becerra replied,

“Once we prove that these anti-competitive activities are not only harming consumers and patients, but that we could put them to the test in front of a court and win, the price that these providers — these health systems — will pay will dissuade them from engaging in some of these practices. It will become more expensive to try to become anti-competitive [rather] than trying to be collaborative with your health care partners and sister organizations.”

The press release announcing Becerra’s lawsuit against Sutter Health also calls attention to a report from the University of California Berkeley’s Petris Center on Health Care Markets and Consumer Welfare. The report evaluated the impact of consolidation on prices and ACA premiums in California’s health care market from 2010-16.

“We found evidence that highly concentrated markets are associated with higher prices for a number of hospital and physician services and Affordable Care Act (ACA) premiums,” reads the report. “In Northern California – which is considerably more concentrated than Southern California across all measures of health care market concentration that we analyzed – inpatient prices were 70% higher, outpatient prices were 17- 55% higher (depending on the specialty of physician performing the procedure), and ACA premiums were 35% higher than they were in Southern California.”

Throughout the Q&A, Becerra describes how his legal team, including his newly-created health care strike force, is working on health care issues at the policy, legislative, and public level. When asked about how the Department of Justice is addressing hospital consolidation on various fronts, Becerra stayed mostly tight-lipped.

“I can’t say much about what we’re doing on any number of fronts. I will tell you noncompetitive activities like consolidation is something that the Department of Justice will continue to examine very closely because we have a job to try to enforce the laws and protect people in California.”